Deck 9: Supplier Management and Development: Creating a World-Class Supply Base

Question 1

The elimination of both marginal and small-purchase-volume suppliers is usually the last phase of the rationalization process.

Answer 1

False

Question 2

Few international shipments of merchandise require insurance coverage.

Answer 2

False

Question 3

Buyers rarely rely on suppliers for cost-reduction assistance.

Answer 3

False

Question 4

Buyers can minimize supply disruption risk from a single suppler by selecting a supplier with multiple production facilities.

Question 5

Central to the design of all supplier measurement systems is the decision about what to measure and how to weight various performance categories.

Question 6

Certain risks, such as those arising from war, piracy, and losses attributable to delays in transit, are generally covered by standard insurance policies.

Question 7

Scenario analysis is technically considered forecasting and attempts to explore and prepare for a few possible future scenarios that may have a significant negative impact on the costs and operations of an organization.

Question 8

Regarding supply base risk, every sourcing decision is different and must be carefully evaluated in its own right.

Question 9

The administrative cost of maintaining 5,000 suppliers will be dramatically lower than the cost of maintaining a core group of 500 highly qualified suppliers.

Question 10

Weighted-point supplier evaluation systems are highly inflexible because the user cannot change the weights assigned to each performance category or the actual performance categories themselves.

Question 11

Full awareness of the causes and effects of supply chain fraud are typically recognized outside the accounting professions.

Question 12

Maintaining small quantities of inventory has been the traditional method of dealing with supply base risk.

Question 13

Pursuing supplier development activities directly with suppliers is both quick and easy.

Question 14

In an absence of competition situation, a supplier may hold the buyer hostage by unduly raising prices without justification or becoming too complacent, particularly when there are higher switching costs.

Question 15

Victims of supply chain fraud are not likely to publicly announce that they were actually victimized by fraudulent behavior because of the potential embarrassment and negative public relations impact.

Question 16

Buyers cannot move too aggressively when rationalizing the supply base.

Question 17

Sustainability reflects only the importance of strategic environmental practices of an organization's suppliers but not the management of social responsibility in the supply base.

Question 18

A buyer should delay reporting a supplier's poor performance until the next annual performance review.

Question 19

A single source can never deliver cost and quality improvements over the life of a contract even if a buyer manages that supplier effectively.

Question 20

If a supplier's product or service is routine to the buyer, it should be considered for supplier development.

Question 21

All supplier measurement systems have some element of subjectivity.

Question 22

In supplier development, the supplier must be convinced that it is in the supplier's own best interest to accept the buyer's direction and assistance.

Question 23

All organizations need to pursue supplier development.

Question 24

A smaller supplier with limited capacity for growth may need to eliminate some existing customers to meet the increased requirements of a larger customer.

Question 25

Supplier performance measurement differs somewhat from the process used to initially evaluate and select a supplier as it is a continuous process as opposed to a unique, one-time event.

Question 26

Many buyers have now concluded that, if they select suppliers carefully and develop close and collaborative working relationships with fewer suppliers, supply risk can actually decrease.

Question 27

The cost-based system is the most thorough and least subjective of the three supplier performance measurement systems.

Question 28

The prime reason for hedging is to protect the buyer against major swings in the value of a future purchase.

Question 29

Supply base rationalization and optimization often involves eliminating those suppliers who are unwilling to achieve (or are incapable of achieving) supply management performance objectives, either currently or expected in the near future.

Question 30

Maintaining multiple suppliers for each item can actually increase the probability and level of supply base risk.

Question 31

The categorical approach to supplier evaluation is commonly used by smaller organizations because it is both easy and relatively inexpensive to implement.

Question 32

Supplier performance that is good enough today should be competitive in the marketplace of tomorrow.

Question 33

Supplier rationalization and optimization should be a one-time activity.

Question 34

Direct involvement in a supplier's operations by buyer personnel is the most challenging part of any supplier development process.

Question 35

There is only one common approach to rationalize the supply base.

Question 36

All buyers are encouraged to engage in currency hedging activities, regardless of their level of experience.

Question 37

Overall reduction in material usage can be accomplished through engineering design changes and reuse and recycle programs.

Question 38

Multiple sourcing can add quality variability to the sourced product because of the use of different materials and processes.

Question 39

Short-term purchase contracts that award small volumes of business to multiple suppliers decrease production costs and provide incentive for individual supplier investments in process improvement.

Question 40

Scenario planning begins with the creation of viable working strategies and plans that would allow managers to respond quickly in the event that a specific risk scenario should actually occur.

Question 41

The supplier performance index (SPI) always provides a complete or accurate assessment of supplier performance.

Question 42

The _____ provides all suppliers, regardless of their performance history, a chance to remain in the supply base.

A)"improve or else" approach
B)triage approach
C)competency staircase approach
D)twenty/eighty rule
E)Six Sigma approach

Question 43

Which of the following is not one of the advantages of a rationalized and optimized supply base?

A)Longer lead-times.
B)Use of full-service suppliers.
C)Lower total product cost.
D)Ability to pursue complex supply management strategies.
E)Buying from world-class suppliers.

Question 44

The _____ requires the systematic evaluation of the performance of individual suppliers and ultimate placement into one of three categories.

A)twenty/eighty rule
B)competency staircase approach
C)"improve or else" approach
D)triage approach
E)zero defects approach

Question 45

The buyer and the supplier must agree on how to equitably divide or share the costs and benefits from the supplier development project.

Question 46

A large supply base means the duplication of a wide range of supply management activities, adding to acquisition cost without a corresponding increase in value added.

Question 47

Considering the cost-based supplier evaluation system, the actual cost per nonconformance event may be difficult to estimate or calculate, as many traditional cost accounting systems are not designed to identify and capture such data.

Question 48

All of the following are advantages of a cost-based supplier evaluation system except _____.

A)total cost approach
B)specific areas of supplier nonperformance identified
C)objective supplier ranking
D)greatest potential for long-range improvement
E)good for firms with limited resources

Question 49

Which of the following is not one of the advantages of a rationalized and optimized supply base?

A)Buying from world-class suppliers.
B)Use of full-service suppliers.
C)Lower supply base administrative costs.
D)Reduction of supply base risk.
E)Absence of competition.

Question 50

Which of the following is not a buyer-specific barrier to supplier development?

A)Buyer's purchase volume from the supplier does not justify investment in supplier development.
B)No immediate or observable benefit to buyer.
C)Lack of buyer's executive support for supplier development.
D)Importance of purchased item does not justify supplier development.
E)Supplier's management agrees to improvement but fails to implement the proposals.

Question 51

Which of the following is not a typical qualitative service factor in a supplier performance measurement system?

A)Problem resolution ability.
B)Technical ability.
C)Process capability.
D)Ongoing progress reporting.
E)Wavelength.

Question 52

All of the following are advantages of a categorical supplier evaluation system except _____.

A)easy to implement
B)requires minimal data
C)different personnel can contribute
D)low-cost system
E)greatest potential for long-range improvement

Question 53

Which of the following is not one of the typical uses of supplier measurement data?

A)Supporting supply base rationalization and optimization.
B)Identifying those highly capable suppliers that may qualify for consideration of longer-term partnerships or designation as preferred suppliers.
C)Identifying those suppliers that are not performing at expected levels so that appropriate remedial or development actions can be taken.
D)Deciding where to locate supplier facilities.
E)Determining a supplier's future purchase volume based on its past performance.

Question 54

_____ is an internal situation when a buyer or manager at the buying company has an undisclosed ownership or financial interest in the supplier or when goods or services are purchased for the buyer's or manager's own personal use.

A)Buyer conflict of interest
B)Falsified counts
C)Fictitious invoices
D)Improper specifications
E)Loss in transit

Question 55

Suppliers are sometimes not willing to accept outside help in the form of supplier development, either because they are too proud to accept help or because they do not see the value in improving quality or delivery performance.

Question 56

Which of the following is not one of the management uses for the data derived from a comprehensive cost-base supplier evaluation system?​

A)Such a system provides the necessary information that allows a buyer to justify buying from a preferred supplier despite a higher unit price.
B)The system allows a buyer to communicate the cost of specific nonperformance events to the originating supplier, which then helps identify improvement opportunities.
C)Quantifying nonconformance costs can result in a chargeback to the offending supplier for unplanned costs.
D)The system allows customized assignment of cost accounting codes depending on how much money is left in the annual budget.
E)A buyer can use this data to identify longer-term sources of supply based on a supplier's total cost performance history.

Question 57

All of the following are common contingency management tools that can be effectively used at the tactical level to assist the supply manager in identifying, analyzing, reducing, and monitoring supply base risk except _____.

A)single sourcing
B)inventory
C)automated visibility and early warning systems
D)use of third party intermediaries
E)scenario analysis

Question 58

During the early phases of supply base rationalization and optimization, the process usually results in an absolute reduction in the total number of suppliers.

Question 59

The remaining suppliers in a rationalized and optimized supply base are seldom capable of performing additional tasks or providing other products and services that add value to the buyer-supplier relationship.

Question 60

Which of the following is not one of the elements of financial risk in a supply base?

A)Inventory carrying costs.
B)Currency exchange rates.
C)Incoterms.
D)Hard vs.soft currencies.
E)Legal systems.

Question 61

_____ can be defined as how supply chain members communicate and collaborate regarding sources of risk, utilizing risk management tools to mitigate and minimize risk and uncertainty across the supply chain.

A)PERT/CPM
B)Scenario analysis
C)Hedging
D)SCRM
E)None of these answers.

Question 62

In supplier measurement, the basic logic of the _____ is built around the calculation of a/an _____.

A)categorical system…supplier performance index
B)cost-based system…process capability index
C)weighted-point system…Q adjustment factor
D)weighted-point system…cost accounting system
E)cost-based system…supplier performance index (SPI)

Question 63

_____ allows a buying organization to react more quickly when risk events occur by already having previously prepared plans and proposed responses in place in advance of the actual event.

A)Hedging
B)Use of third party intermediaries
C)Multiple sourcing
D)Scenario analysis
E)None of these answers.

Question 64

All of the following are mechanisms of a fraud control system except _____.

A)clear separation of powers
B)ongoing and routine computer or artificial intelligence monitoring of routine and specialized transactions
C)a comprehensive set of policies dedicated to preventing fraud and taking swift and decisive action when it is detected
D)ensuring that purchasing personnel never work alone or remotely
E)a routine system of audits

Question 65

All of the following are elements of market risk in a supply base except _____.

A)the number of buyers competing for the same goods
B)increasingly shorter product life cycles
C)regional political risk
D)threat of emerging, often disruptive, technologies
E)protecting and maintaining trade secrets and intellectual properties from misuse or misappropriation by suppliers

Question 66

The supplier performance index (SPI) equals (_____ plus _____) divided by _____.

A)Total Purchases….Nonperformance Costs….Total Purchases
B)Nonperformance Costs….Total Purchases….Nonperformance Costs
C)Total Purchases….Appraisal Costs….External Failure Costs
D)External Failure Costs….Internal Failure Costs….Total Purchases
E)Transportation Costs….Appraisal Costs….Prevention Costs

Question 67

_____ in a supply base consists of such factors as: country stability, regional stability, party and governmental stability, levels of corruption, differences in contract law and intellectual property rights, elections, military actions, civil disturbances, terrorism, trade balance issues, trade wars, and duties and tariffs.

A)Financial risk
B)Market risk
C)Supplier company risk
D)Political risk
E)Sourcing risk

Question 68

Which of the following is a disadvantage of a cost-based supplier evaluation system?​

A)Least reliable.
B)Most complex so implementation costs are high.
C)Less frequent generation of evaluations.
D)Most subjective.
E)Tends to focus on unit price.

Question 69

The _____ supplier evaluation system seeks to quantify the total cost of doing business with a given supplier, as the lowest purchase price may not always result in the lowest total cost for an item or service.

A)Six Sigma
B)zero defects
C)cost-based
D)categorical
E)weighted-point

Question 70

According to ISM, _____ is a framework of measurable corporate policies and procedures and resulting behavior designed to benefit the workplace and, by extension, the individual, the organization, and the community.

A)supply chain risk management
B)sustainability
C)ISO 9000:2008
D)social responsibility
E)supplier development

Question 71

Which of the following is a disadvantage of a categorical supplier evaluation system?

A)Least reliable.
B)A sophisticated cost accounting system required.
C)Less frequent generation of evaluations.
D)Most subjective.
E)Usually manual.

Question 72

_____ is the process of identifying how many and which suppliers a buyer will maintain.

A)Supply base optimization
B)Supply base rationalization
C)Six Sigma
D)Zero defects
E)Strategic sourcing

Question 73

Which of the following is not a supplier-specific barrier to supplier development?

A)No immediate benefit to supplier development is evident in the buying organization.
B)Lack of commitment by supplier's management.
C)Poor implementation of improvements.
D)Lack of skilled engineering resources.
E)Insufficient employee skill levels.

Question 74

The _____ identifies those 20 percent of suppliers receiving the bulk of purchase spend or that minority of suppliers that causes the most quality problems.

A)"improve or else" approach
B)triage approach
C)strategic sourcing approach
D)competency staircase approach
E)twenty/eighty rule

Question 75

Which of the following is a disadvantage of a weighted-point supplier evaluation system?

A)Tends to focus on unit price.
B)Most complex, so implementation costs are high.
C)Most subjective.
D)Least reliable.
E)Cost accounting system required.

Question 76

All of the following are general categories of supply base risk except _____.

A)political risk
B)market risk
C)sourcing risk
D)financial risk
E)employee hiring risk

Question 77

The _____ requires suppliers to successfully navigate a successive series of performance milestones in order to remain in the supply base.

A)triage approach
B)competency staircase approach
C)M*A*S*H approach
D)"improve or else" approach
E)twenty/eighty rule

Question 78

In overcoming the barriers to supplier development, which of the following is not one of the approaches typically used?

A)Direct-involvement activities.
B)Single sourcing.
C)Incentives and rewards.
D)Warnings and penalties.
E)Hands-on activities.

Question 79

Which of the following is not a typical supplier development activity?

A)Providing incentives to suppliers for improved performance.
B)Promoting competition among suppliers.
C)Raising prices paid for purchased goods and services.
D)Directly involving buyer personnel with suppliers.
E)Providing necessary capital.

Question 80

_____ involves a detailed analysis of the supply base to ensure that only the most capable and highest performing suppliers are kept in the supply base after it is rationalized.

A)Supply base optimization
B)Outsourcing
C)Strategic sourcing
D)Supply base reduction
E)Supply base management